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In recent years we have seen a proliferation of screens and modes of access.  Many around the world who otherwise would be unconnected are now able to direct their attention from analog subjects to digital interfaces.  This great surge of global Internet access now envelops us at the high end (Blackberry & iPhone) and at the low end, where any browser will do.  Facebook will soon cross 200 million users world-wide, on its way to a billion in the next few years.    Twitter is just getting started.  Just think of the local communities around the world who will take to social media with a vengeance in the next few years, finding the same joy of expression and participation that we each felt when connecting with old school friends on Facebook for the first time.

But, as Michael Goldhaber has pointed out, “Attention, at least the kind we care about, is an intrinsically scarce resource.”  This means that at some point, all of the attention that can go online, will be online.  At such point, attention will enter a constant process of redistribution.  One could argue that we are seeing this phase transition already in the United States, as most of the audience that will be online is online.  Said another way, no new attention is being created.  People are simply shifting their attention from portals like MSN, AOL, Yahoo! to social media like Facebook, Wordpress and Twitter.

In social media, we are all now equally available to eachother.  The cost of receiving attention has gone to zero.  You have my blog address, my Facebook profile, and my Twitter account.  There I am.  Go ahead and consume me.  Just because you can easily access my information, however, does not mean that you will.  This is where the attention economy gives way to the influence economy.  Determining who to pay attention to (and who to ignore) represents a new kind of social media literacy.  For now, this literacy is something that we each are developing ourselves, as we muddle through  friending and un-friending, following and unfollowing.  This is analogous to the ad hoc discovery of web sites circa 1995, before the introduction of Netscape’s “Cool Site of the Day” and the Yahoo! directory.  The advent of people discovery tools, however, is here; just note Twitter’s recently introduced “suggested users”.  The amateur land grab for friends and followers of recent months will soon give way to a less populist  mechanism for discovering people.  Call it the emergence of “mainstream” social media.

Regardless of whether social media leadership gets established from the bottom up, or from the top down, it is useful to analyze in terms of its constituent parts of information, attention and influence:

• Information:  Being able to produce unique information, on a consistent basis, is the prime mover.  Most leading social media brands need to produce info on an ongoing basis, although others can leverage historical achievements to bootstrap their brand.  For every Fred Wilson, Mike Arrington and John Battelle that need to spend years of daily blogging, there is Lance, Shaq and Snoop that simply need to put up a shingle to start driving traffic.
• Attention:  As the financial economy teeters on insolvency, the attention economy is as healthy as ever.  Every social media user shares information with the hope of getting more attention.  Some are happy for attention from strangers, while others want attention only from those that they know and care about.  Regardless, most bloggers, posters, sharers, tweeters all do so with the goal of receiving more attention.
• Influence:  Influence can be defined as the ratio of attention one gets relative to the amount of information one produces.  In this formulation, the person that gets the most attention despite being relatively quiet would have the most influence (ie reclusive novelists like Pynchon).  Somebody that gets a lot of attention but spends an inordinate time producing and distributing information would be less influential.

As we move into a truly social web where the relationships between people are more important than the relationship between pages, understanding the complex interplay of information, attention and influence is necessary for identifying leaders.  Why is leadership relevant to social media?  Leaders attract followers, and followers consume the information that the leaders produce.  This is a standard media model.  In the absence of paid subscriptions, advertising will be required to subsidize the social web.  Any advertiser looking to generate value will, therefore, benefit from having its brand shared by leaders.  Getting these leaders to promote brands- authentically- is the hard problem that us in the business of social advertising are trying to solve.

A few weeks back in rainy NY, I had a great conversation with my friend Tom Levin. Tom is a Professor at Princeton University, where he teaches media theory in the German department. Tom suggested that the roots of today’s bloggers and twitters can be traced back to the Flaneurs and Dandys who strolled the streets of Baudelaire’s 19th Century Paris. I wondered if there was a underlying behavior that connected these dots. Tom suggested the term self fashioning, which I thought was perfect.  (credit to Stephen Greenblatt for the term).  

Think about the most successful social media mavens in our community as it relates to the act of self fashioning: Calacanis saunters like a Dandy in LA with his bulldogs Taurus and Fondue; Fred unconsciously invokes the image of the Flaneur with his latest tweet from Paris. We are all establishing our identities by fashioning ourselves out of the communication tools, profile updates, and other services we have available to us. 

In an attempt to leverage this self fashioning behavior on behalf of marketers, we have been working on a new product at SocialMedia.com. It’s called a WOMI, short for Word Of Mouth Impression.Instead of being an ad about a thing, it’s an ad about a person- a person you know, a friend. It tells a short story. It might be that “Jonas gets his Swagger from his scent” or “Marilyn uses Olay every week to moisturize.” These messages are created on the fly by our social ad server, which harvests interactions across our network, filters them through a social graph, and amplifies them in “traditional” banners. 

Though simplistic, this format is an early step in the evolution of social advertising. 

First: find a hand-raiser / evangelist / advocate willing to voice his opinion to his friends: 

Then, share his opinion with his friends: 

It is a form of store-and-forward communications that is as old as the original Darpa Internet. It seems novel only because banner ads have not changed much since they were invented 15 years ago.  

When I showed him some recent examples of these social ads, Tom was skeptical: why would somebody choose to share their opinion about a brand with their friends? What motivates somebody to want to interact with an advertiser when all they really seem to want to do is communicate with their friends? This of course is the fundamental dilemma for advertisers wishing to leverage social media:

“How can I make somebody care so much about my {soap, candy, beverage} product that they advocate on my behalf to their friends?”          

The problem with formulating the dilemma this way is that it focuses too much on the (in)capability of the brand to persuade, and not enough on the expressiveness of the advocate.  All social media environments depend on active communities; however not all community members are equally active. Usually, a small group of “producers” is disproportionately expressive relative to a much larger population of “consumers”. 

This begs a number of questions:

• is there a set ratio between producers and consumers of social media?
• is the difference between these two types purely situational (certain people are opinionated about certain subjects)
• or is there a deeper, biological difference between producers and consumers?

Most birds have a preen gland, which secretes an oil that they rub onto their feathers. It is a basic form of self fashioning.

I wonder if people have similar glands, which compels them to share information.

Change. We hear the word frequently. It’s utilized by politicians, elite business people, and millions of others around the world. Because with change comes the promise of something better. Something revolutionary. Something that will change the world! Or, at least something that sucks substantially less than it did before.

Since the beginning of time (currently known as May 24th, 2007), it has been SocialMedia’s passion to understand the dynamics of social applications, and specifically, how to help developers make money from them. In doing so, we’ve explored many different angles of monetization, ranging from virtual currency incentives back in June of last year, to AdSense-like ads currently, and everything in between. So, now that it’s been over a year, what have we learned?

Simply put, traditional advertising and social media environments don’t really mix.

Now, we mean no disrespect to the dancing ladies of many mortgage ads, whose killer moves have lured millions into saving money. Nor do we wish to offend Mr. Monkey of punch the monkey, as he’s undoubtedly accumulated enough angst to unleash a world of clicking furry on the internet. And Google, the king of kings. If developers were creating tech blogs or web hosting review sites, AdSense would be in heaven. But, unfortunately, “fun wall” and “hug me” keywords aren’t in huge demand.

And thus, we at SocialMedia realized something had to change.

For the past many months, we’ve been tidying up our ad serving, washing and drying our metaphorical dishes, and working away to bring you revolutionary things! So, on this day, can we proudly proclaim we’ve solved social media monetization and changed the advertising world? Not to the extent that Google has solved search monetization. But, we have made great progress. And with little doubt, we can stand up, raise our arm in jovial assertion, and confidently proclaim, “In social media, everything must be social — even the ads — and we’re going to help make it happen!”

Uh oh. Now we’ve done it. We just used “ads” and “social” in the same sentence. Sound the alarms! Unleash the privacy brigade! All ur data are belong 2 us!

Or not.

Below is a concrete example of a social banner. It’s an ad, presumably sponsorable by a company seeking to spread the word about its new-found greenness. So, without further ado, here’s a our user violating, privacy busting, all your data in a social banner, banner!

Blog Reader: “Umm…wait. Is this a trick? My data has to be in here somewhere. I know! It’s hiding under the alien! Oh, no. That’s silly. Wait! You pulled my facebook interests to stereotype me as a certain type of user, thereby populating the buttons with choices that would appeal to me, thus increasing ad CTR!”

As Winnie the Pooh would say, “Oh bother.”

Your data isn’t in there. Not at all. But, let’s say you do opt to share why you’re green with your friends by clicking on a button. This is what your friends would see, except replace this dude’s picture with yours.

Blog Reader: “OMG I’M IN THE AD! You mean when I choose to share why I’m green with my friends, my friends will actually see it?”

It’s rather difficult to share something with your friends when we can’t tell your friends the thing you wanted to share. So, yes, that’s precisely what we did.

Blog Reader: “Wait, did you just spam all my friends too?”

No, we didn’t.

We did not post a news feed item to your friends on your behalf.

We did not invite your friends to an application.

We did not email your friends.

We did not send your friends a notification.

We did not IM your friends.

We did not post a message to your friends walls.

We did not send your friends a facebook message.

We did not post anything to your profile.

Nor will we be sending your daily email reminders about your green status, and that you should update it.

In short, we did not do anything other than wait for your friend to show up in an application that uses SocialMedia’s advertising services, and then display the message you explicitly chose to share to your friends. And, we did not access your data from Facebook, other than making a call to get your 50×50 pixel picture, which you can control via facebook’s privacy controls. We also have our own opt-out mechanism.

Blog Reader: “You know, this thing seems very familiar to a lot of applications on facebook I have installed before.”

You mean the ones that did spam you and your friends in every which way and had access to every little bit of your data, and every little bit of all your friends data? Yes, I’m familiar with those.

Blog Reader: “I seem to have forgotten why I was so angry. Oh yes. BUT I’M IN AN AD!”

The fundamental reason people dislike advertising is because they think it takes advantage of them. This is especially true when individuals are inside ads. But, our goal is not to put people inside of ads as a gimmick, as gimmicks die and provide little value to anyone. Instead, we want to facilitate real conversation and interaction around certain products and brands.

We don’t get paid to put you in ads. We’re getting paid to present you with the opportunity to interact with a product socially. And, if you choose to do so and we can display this interaction to your friends, then we’ve done half our job. The other half is ensuring that the social experience was well received by you and your friends. It’s a different type of adverting that pulls from the core of the social graph in a distributed manner that is neither invasive nor annoying. Essentially, we’re building mini-apps inside your apps, available when you want them, empowering you to share and communicate with your friends wherever you go (inside of facebook, of course!).

That’s SocialMedia’s mission, and that’s how we plan to bring change to the advertising industry.

I worked on this post yesterday with my colleague at socialmedia.com, Nick Gonzalez.

It does a good job summing up what I have been up to for the past 6 months since my last blog post.

For more detail, please see our company blog.socialmedia.com.

Life in SF is good, and I am really excited to be executing against many of the ideas behind my media futures series from a few years back.

*

The past seven years saw tremendous innovation in the way people interact with the web. It stopped being a “read only” format and invited a whole new group of users to contribute. Sites like Wikipedia (2001) enabled users to push a wealth of knowledge into the Internet’s collective consciousness. Delicious (2003), Digg (2004), YouTube (2005), and countless others turned those contributions into conversations between millions of people. Sites like Twitter and FriendFeed makes this evolution toward conversational, or social, media even more atomic and poignant.

In the valley, the community has become experts at developing technology to enable these conversations. In some cases we’ve become “too” effective and users have become more interested in each other than branded content.

You can see this shift if you look at what is happening to the Internet’s top destinations. Older sites are integrating new social media technologies into their sites. New social media properties are growing. The two top social networking sites (Facebook and MySpace) command about a third of the monthly unique users Yahoo does across their properties (500 million).

The trouble is that these sites are lacking an improved revenue enabling technology. However, this technology is not about enabling conversations between users, but enabling conversations between brands and users. 1999’s banner ads just don’t cut it and enhanced targeting doesn’t increase the value of the advertisement, just the value of the audience.

But we believe we’re on the path to the answer.

SocialMedia Enables Social Media Monetization

SocialMedia’s advertising system has been one of the principle enabling technologies for the Facebook platform. Appsaholic, which grew out of our founder’s initial experiments on the platform, enabled developers to monetize their applications and reward them for their efforts. To date we’ve powered thousands of applications and paid out millions to developers. We’ll reveal more information in future releases. It’s also enabled our company to operate profitably without having to take more venture financing.

Connecting Silicon Valley With Madison Avenue

However, that’s only the start. If we’ve been quiet in the valley, it’s only because we’ve been shouting on Madison avenue. Geeks are already connected with geeks. Now our primary role over the past couple of months and even the next decade is to help connect Madison avenue to Silicon Valley. Ad agencies and brands aren’t technology companies and have been seeking our advice on how to participate in this latest evolution of the internet called social media.

A lot of the conversation is taking place on the other coast. Earlier this week Seth Goldstein gave a keynote address at the New York IAB Social Media Summit (coverage) where we joined a panel of other social media experts like Rich LeFurgy, Rock You, and Facebook. Next week Federated Media will be holding a Conversational Marketing Summit in New York.

BMW, NBC’s American Gladiator’s, Newline’s Harold & Kumar, and Disney are just a sample of the advertisers we’ve been engaging with users through social applications. The campaigns have followed a spectrum of offerings, including promotion, sourcing application development, sponsorship, and customized targeting along application categories and demographics.

Search Doesn’t Sell Brands

Facebook may not have Google’s profit engine, but they are doing 300mm in revenue in their fourth year. Google’s advertising system is great at selling products, but doesn’t sell brands. As our CEO Seth Goldstein puts it, “Brands are experienced in terms of emotional benefits which keywords have a hard time conveying.”

Applications, regardless of criticism, remain a widely used medium (15.4 million users est. in Jan.). The content might not be so pretty, and it might favor subjects that are risque (friends for sale, fluff friends, superpoke, naughty gifts…) but they are intimate interactions between two trusted sources, which in advertising terms might be called “persuasion.”

A brand can pay more than $10 cpm to reach a dwindling television audience, or they can pay a fraction of that and reach a growing mass market of 75 million friends and over 100 million on MySpace.

Advertisers Are Responding To The Change

Large corporations are mobilizing to respond to the change. Procter and Gamble now has an internal group called “The P&G Social Media Lab” that we, among a number of social media startups are a part of. GroupM, which is WPP’s online media organization, spends more than $4 billion of online display advertising. This number is going up not going down, as even within a recession marketers are shifting their budgets online.

As Rob Norman, the head of GroupM contends….. The vast majority of advertising spent is at the top of the funnel to activate and engage consumers, whereas the bottom of the funnel is more about conversion. Despite Google’s growth, they remain at the bottom of the funnel. Which is why they bought Doubleclick and their display network to climb up the funnel.

Marketers are realizing that the top of the funnel, online, is inside of social networks. This is where the next people magazine, Seinfeld, MTV is being born, and where the mass market (100mm+) audience is converging, and where billions in brand advertising is starting to flow.

Madison Avenue has “poked” Silicon Valley, and Silicon Valley needs to poke back.

“Look at all these companies trying to grow their social networking assets by opening them up!”

We are led to believe that this is- without a doubt- fantastic news for the future of the free web.

Is it?

I am having a harder and harder time distinguishing open from closed, and an even harder time feeling the difference between these two seeming extremes. The whole debate has become a happy web medicant, the “soma” of the blogosphere.

I don’t think that the open vs closed debate is that useful, since both are necessary for any successful Internet platform. In On Certainty, his last set of philosophical reflections, Wittgenstein responded to those who doubt everything: “If I want the door to turn, the hinges must stay put.”

In the context of social networking, one needs closed systems in order to enable openness. These systems might include:

1. strong access controls
2. proprietary APIs
3. exclusive social graphs
4. standardized interfaces

All of these are core to the Facebook experience and which have driven the incredible popularity of the service.

The flip-side is also true. We need to foster truly open access in order to drive innovation on top of these closed systems. This means:

1. a programming language that any developer can use to express her ideas
2. unencumbered viral distribution channels
3. real-time public metrics

All of these are all hallmarks of the current Facebook app ecosystem (and the qualities that the Open Social coalition hopes to achieve).

Historically, Social Networks have generated tons of page views but have had a hard time monetizing these impressions. “Professional” content properties focused on deep verticals, such as C|Net and BabyCenter.com, regularly attract $20+ CPM ad rates, whereas “amateur” social media sites like Digg, MySpace and others are lucky to generate CPMs above a few dollars with any consistency.

Three primary critiques have emerged in recent months that call into question the viability of social media being produced on top of open social platforms, exemplified by Facebook:

1. Facebook apps are not real media

A few weeks ago Kara Swisher dismissed Facebook apps as a “children’s hour:”

And if that is all there is, can Facebook really build a viable and long-lasting business on what is essentially a bunch of games that will ultimately become wearying for users? Doesn’t it need more robust apps that actually are useful and relevant and make Facebook the service that Zuckerberg has often told me was a “utility”?

Kara suggests that real social media apps would be robust, useful, and relevant; not the inane, ephemera of super poking, graffiti walls and food fights. Despite the apparent lack of utility of Facebook apps, they are exceedingly popular. Take Slide’s suite of apps (led by TopFriends), or Rockyou’s, or Grafiti, or the hundreds of apps across our Social Media network- together all of these apps are generating hundreds of millions of page views each day. And none of them existed six months ago. It is curious to think whose media is being displaced by all of this new attention: Are people turning fewer pages on MySpace? Spending less time reading blogs in their feedreaders? There is little doubt, in 2007, that MySpace (Fox) and Blogs are legitimate forms of media. Which begs the question: is media defined based on something innate in terms of its form, or is it instead defined based on its usage?

There are interesting parallels to Facebook apps t0 be found in the recent history of blogs. In 2003 and 2004, blogs were dismissed by traditional Internet media as being nothing more than narcissistic ruminations about the vagaries of everyday life. After all, who really cared about what Fred Wilson listened to at his Amagansett beach house? Flash forward a couple of years and blogs have become big business. Although my blog and your blog together might only generate a few dollars a month via AdSense, “professional” blogs such as Huffington Post and Engadget are generating millions of dollars of revenue and taking reader-share from NYTimes, MSNBC, and others. John Battelle and his team in Sausalito are building a viable media franchise representing premium blogs such as BoingBoing to advertisers looking to participate in “conversational media.”

Just like the post is the expression of the blogger (and the article is the expression of the journalist), so the app is the expression of the developer. Unlike blogs and traditional Internet media sites, however, apps do not provide content. Instead, they provide a structured, social environment where content can be created. The media, in this case, only comes to life through the social interaction of two people. Facebook’s open social platform is a printing press not a book. The app is the book in the social media universe. Just as with books, apps focus on certain themes and relate to specific audiences. The author of the app- ie the social media developer- publishes code that facilitates a certain kind of collaboration among a target group in her social graph.

The first products of this new kind of printing press may well end up looking trite and ephemeral, with the benefit of some longer historical perspective.  But so were most of the first books, and Internet sites, and blogs.  But there is no doubt as to the viability of even these early experiments as legitimate media properties.

Coming next:   #2: “Facebook apps are all head, no tail.”

The original sin of social media may be remembered by future generations as the moment when poke and wall exposed themselves at the Facebook Platform F8 event in SF on May 24, 2007.  Against the backdrop of an open social graph API, these core functions suddently enabled 3rd parties to create entirely new forms of social interaction: “Who do you want to XXX now?,” “Wanna send a XXX to your friend?,” “Who is XXXer?,” “What do you want to draw on your friend’s XXX?”

Platforms

A platform’s success is based on its generosity: how many sustainable applications have been built on said platform?

For an embodiment of a successful platform, cf Dave Morin, the authentic leader of Facebook’s technical platform. When you sit down with him, you are struck by his commitment to openness and providing all applications with a level playing field. He combines the intellect of an economist with the empathy of a sociologist. Any fear a developer may be wrestling with in terms of whether to base their business on Facebook, melts melts away in Morin’s disarming presence. You think to yourself, “Geez, sounds like these guys at Facebook are genuine- the platform is open.”

Applications take what the platform gives.

Applications

The success of an application is based on its ability to consume, to take, information from a platform and interpret it specifically for a user’s benefit. In media futures speak, the Facebook platform exposes an API which creative developers use to infuse their apps with a certain alchemical magic, otherwise known as engagement.

Perhaps the best personification of a successful application is Max Levchin, the intense, “nothing will stand between our engineers and N consumers” CEO of Slide. Slide is the biggest application suite on the Facebook platform. Max wastes little time at conferences educating others, as he seems to prefer notating on a whiteboard about optimizing viral growth paths. If Morin is like Jeff Sachs the world economist– working hard to reassure countries that he will promote free trade– then Levchin is like Dmitri Balyasny, the hedge fund trader who stays under the radar while managing vast money flows.

Advertising takes what the applications give.

Advertising

While apps take from the platform, they give to advertising. The 10-year procession of online advertising models from when banners first appeared in 1995 to today’s behavioral targeting, can be seen simply as an emerging ability for web sites to share more about what they know about their users with the advertisers that want to reach those same users. This is the apogee of what I shall describe as personal advertising, which is all forms of advertising that try to market to you based on who you are, what you have done, and what your commercial intentions may be. All advertising today, more or less, falls under this umbrella.

Recently, I have been working on a different kind of advertising, social advertising. This is when the ads you see aren’t simply influnced by your behavior, but in fact are driven by the behavior of those in your “friend group.” This was never possible before a social network such as Facebook enabled new kinds of applications that could carry social graph information up into the advertising layer of the online media stack. These kinds of ads take the value of rich data about social influence (which is extracted from the applications) and pays this value back to the underlying platform, which benefits in the form of increased CPM. I will have much more to show and tell about social advertising next week at the Web 2.0 conference. One thing that should be self evident is that the only forms of advertising that work inside of social media are social advertisements.

The most desperate attempts that personal advertising continues to make in order to capture my attention not withstanding:

* For a powerpoint-icized description of Social Advertising, see the brief presentation I gave at Dave McClure’s excellent Graphing Social conference this week

For weeks, months, I have been working with my team at SocialMedia building applications inside of a clean well-lit, hermetically sealed social network called Facebook.

Here is what we now know about this platform:

• It’s has an “open” API that exposes its “closed” social graph.
• It shields each of its 30 million users behind a cloak of absolute privacy, where every social connection is required to opt-in.
• It maintains total control over the syntax and organization of every single one of its pages.
• It is starting to dominate the time spent online by its users, stealing click-share from every other web site and service.
• It holds captive the rich behavioral data of its audience.

Fred almost threw me out of his office a few weeks when I suggested that “closed was the new open.”

I had challenged him on his logic for investing in Twitter by asking “what is the role of Twitter when Facebook has commodified the status update?” and he replied that the entire USV portfolio was built on the premise of openness. As a co-founder of AttentionTrust and co-organizer of the Open Data conference, I am, of course, a strong advocate for users needing to own copies of their own data and for them to be able to easily move it around and see how it is being used by others.

That being said, I sense that users (including the 57,000 blogosphere alpha dogs) are increasingly tired of copying and pasting javascript code into their blogs and manually organizing their online identities. The beauty/horror of Facebook is how incredibly easy it is to add applications with a single click. Once again, convenience seems to be trumping data conservation.

Just as AOL consolidated its position in the early 90’s by offering a far more convenient, user-friendly interface to the online world (despite the reality that it was a proprietary walled garden written in rainman), so now is Facebook doing the same by offering a better interface to your online world.

The openness that Facebook enables is really simply the opportunity to build closed ecosystems on top of its social graph. This is the story, for example, of Slide’s Top Friends network, which in less than two months has established a proprietary social graph on top of Facebook’s own proprietary social graph.

More on this in the days to come.

In the meantime, check out our new blog.socialmedia.com for commentary about an important new meme, NFO: News Feed Optimization.